On the evening of September 10th, Top Sport, the largest sports equipment distributor in China, issued a profit warning, predicting that its net profit for the six months ending August 31st would decrease by about 35% year-on-year compared to the same period last fiscal year's 1.34 billion yuan.
This profit warning reads: "Due to the drag of weak macro consumption on the retail environment of the industry, Taobao Group's revenue decreased year-on-year during the reporting period. At the same time, the slowdown in demand had a more significant impact on offline customer flow, leading to negative operating leverage and resulting in a year-on-year increase in sales and distribution, as well as general and administrative expense ratios
It is reported that the year-on-year increase in retail discount rates for Taobao in the first half of this fiscal year (March 1 to August 31, 2024) was the main reason for the year-on-year decline in gross profit margin. Behind the increase in discount rates is the rise in inventory caused by the decline in revenue, which necessitates increased promotion efforts. At the same time, the proportion of online retail sales has increased during the period, and the discount rate for online sales is higher than that for offline sales.
It is reported that Taobao, which landed on the main board of the Hong Kong Stock Exchange in 2019, is expected to officially announce its semi annual report for this fiscal year before the end of October 2024. In the previous full fiscal year, Taobao's annual revenue was 28.933 billion yuan, a year-on-year increase of 6.87%.
After the profit warning was issued, the stock price of Taobao opened on September 11th, nearly 13% lower than the previous day's closing price of HKD 2.66, and continued to decline after the opening price of HKD 2.32. At present, the total market value is hovering around HKD 13.15 billion.
In fact, it is a common situation in the industry that offline retail of sports equipment is difficult to do. Previously, Baosheng International, a retailer and distributor of sportswear and footwear products, saw its performance decline by nearly 9% in the first half of the year, with revenue of 9.98 billion yuan. In the second quarter, revenue fell by over 10% to 4.58 billion yuan.
At the close of September 10th, Baosheng, also listed on the Hong Kong stock market, had fallen to HKD 0.53 with a market value of less than HKD 3 billion.
However, in the semi annual report, the net profit of Baosheng International increased by 10%, and the gross profit increased to 34.2%. In terms of channels, the online channel growth was also quite obvious, with the Tiktok platform rising by 100%, and the channel revenue of Tmall, JD and other platforms growing by nearly 20%.
Baosheng International, affiliated with Baocheng Group, one of the world's largest sports shoe OEM companies, uses YY Sport as its retail brand in Greater China.
In addition, another force in the field of sports goods retail is regional market retailers. For example, Longhao Sports in Shenzhen, and Jinglang Sports, founded in 1987 and headquartered in Chengdu, Sichuan, have cooperative retail businesses with almost all domestic and foreign sports brands in the southwest region. This summer, Skechers opened its largest flagship store in the Asia Pacific region in Taikoo Li, Chengdu, in collaboration with Jinglang Sports.
At present, whether it is Taobao or Baosheng International, the main problem faced by sports retail distributors is the cold offline sales. In terms of Baosheng, the number of sales stores decreased by 45 in the first half of this year, and currently there are 3478 directly operated stores nationwide.
In the whole field of sports consumption, the sales scene turns to online. Almost all sports brands have their own Tmall flagship stores, self run small programs, Tiktok live broadcast rooms, etc. In particular, the sales volume of Tiktok live broadcast is doubling. The price advantage of wholesale business for distributors in the past has almost been wiped out by the impact of online channels. In addition, in recent years, Nike's sports brand DTC (direct to consumer) trend has shifted resources towards self operated businesses, making it difficult for sports retail distributors.
List of cooperative brands on Taobo official website.
In the past, these domestic sports retail distributors mainly relied on cooperation with Nike and Adidas to make a lot of money. Nike entered the Chinese market in 1981, while Adidas officially entered the mainland Chinese market in 1997. The rapid expansion history of these two giants in the Chinese market is also the history of the rise of these sports retail distributors.
However, in the past two years, these domestic sports retail distributors have also realized that they cannot rely solely on Nike and Adidas. Taking Taobao as an example, although the two major brands still account for a high proportion of its revenue, Taobao has also started to adjust its layout early and accelerate the expansion of cooperation with new brands.
At present, Taobo has cooperated with sports brands such as PUMA, Weifu Group, Arthurs, and Li Ning. At the same time, in the past two years, it has continuously partnered with niche sports brands and outdoor brands, including strategic cooperation with HOKA brand and cooperation with outdoor brands such as Kaileshi and Lengshan. In May of this year, Taobo introduced the Canadian high-end off-road running brand Norda to the Chinese market and exclusively operated the brand's business in the Chinese market. As of the last annual report release, Taobao has a total of 6144 stores.
The overall consumption environment is becoming more cautious, not only the challenges faced by the sports consumption industry, but also the challenges faced by offline consumption and sports retail distributors. The truly robust operation tests the comprehensive ability of these companies to plan ahead and respond to challenges.